Stock markets on Monday gave a thumbs up to exit polls which suggested the BJP-led NDA would win over 350 seats in the six-week-long Lok Sabha elections, whose fate rests in the hands of EVMs. A win for Narendra Modi-led BJP was the base case scenario, but analysts said exit polls have had a mixed success in predicting the outcome of the last few elections, so all eyes will be on the actual number of wins for the BJP on Tuesday, June 4.
For example, in the last two elections, in 2014 and 2019, exit polls predicted lower numbers of seats for the NDA than the actual results, Nomura India noted.
“We believe it would be inappropriate to extrapolate past trends to suggest that the NDA will win more seats than the exit polls suggest. However, given the consensus across all exit polls, we believe the formation of a stable NDA government is the most likely outcome,” Nomura India said.
Antique Stock Broking said exit polls have a checkered history, with incorrect predictions made in the 2004 and 2009 general elections and recently in the 2023 assembly elections in Chhattisgarh and Karnataka.
“There are several instances in which exit polls underestimated the NDA’s victory margin in the 2014 and 2019 general elections, and in the 2023 Madhya Pradesh state elections,” the report noted.
MK Global said exit polls are not conclusive, but the margin of error has narrowed over the past two election cycles. “If the final outcome is in line with the exit polls, it is likely to calm investor nerves as political and policy continuity is favorable for risk assets in the short term and macroeconomic stability in the medium term.”
Can the market sustain its rise?
Elara Securities said empirical evidence suggests that election years are positive for the stock market. In the last four election years, the Nifty 50 has returned an average of 32 per cent, with post-election returns contributing significantly.
“The broader markets are set to perform even better. While pre-election performance has been mixed, the post-election rally has historically been broad-based, leading to positive returns across sectors. With the Nifty yielding 4 per cent YTD, there is significant upside potential left in the post-election rally,” it said.
Disclaimer: Business Today provides stock market news for informational purposes only and should not be construed as investment advice. Readers are advised to consult a qualified financial advisor before taking any investment decisions.
